MEXICO CITY/SAO PAULO, April 7 (Reuters) – Inflation figures from Latin America’s two largest economies underscored the contrasting outlooks for policymakers in Brazil and Mexico.

Brazilian price growth neared the top of the central bank’s target range in March, data showed on Thursday, while inflation in Mexico slowed more than expected.

Key economies in Latin America including Brazil have pushed interest rates higher in recent months to cool growth and quiet inflation. But Mexico has kept rates steady since mid-2009 as the economy recovers slowly from recession.

That difference means that while policymakers in Brazil fret about when to raise borrowing costs and whether such a move will draw more speculative capital, Mexico’s central bank is having no trouble keeping borrowing costs low as the economy expands.

“It’s a trend that we’ve seen for a while, where Brazil’s central bank is behind the curve and Mexico’s central bank is ahead of the curve,” said Siobhan Morden, head of Latin America Strategy at RBS Securities.

The near-term consequence for Brazil is that investors will continue to want higher returns for parking their money in Latin America’s largest economy, said Enrique Alvarez, head of Latin American research at IDEAglobal in New York.

“It’s a simple matter of demanding more compensation for the uncertainty of inflation and the currency value,” he said.

Mexico’s central bank chief has few such worries.

“For a central bank there is no better combination … than an accelerating growth rate and lower inflation,” Banco de Mexico chief Agustin Carstens said on Wednesday. [ID:nN06202736].

Severe weather in northern Mexico had policymakers fearful earlier this year that inflation would be reflected in crop failures but those concerns never materialized.

At an annual banking convention in the resort city of Acapulco on Thursday Carstens said high commodities prices had so far not reflected on Mexico’s inflation.

Mexico’s annual rate of inflation slowed more than expected in March to its lowest level in nearly five years, giving the central bank ample room to keep borrowing costs on hold. [ID:nN07283537]

Brazil and Mexico have benefited from a flood of foreign cash in recent months as investors from rich countries look for yields that will outpace low yields in the developed world.

Both countries have taken advantage of foreign interest to boost foreign reserves. Mexico still welcomes outside cash but Brazil is trying to slow inflows of speculative cash which are driving its currency to highs not seen since August 2008.

Brazil on Wednesday announced a tax change to try to curb the real’s strength but investors ignored the move and pushed the currency up nearly 2 percent on Thursday.

Analysts also fault policymakers for not acting quickly enough to keep a lid on consumer demand.

“Overall, we continue to think that the government’s reluctance to slow domestic demand decisively should keep inflation high,” Barclay’s Capital wrote in a client note.

In a sign of strong spending by Brazilians, auto sales clocked a double-digit increase in March. [ID:nN07107104]

Analysts are torn on how policymakers in Brazil will ultimately resolve the competing pressures of wanting to control prices while not stepping too hard on growth.

In Mexico, the latest benign data on consumer prices has some pushing back their bets on the timing of its first interest rate hike.

“Inflation continues to plummet like a rock,” Nomura’s Benito Berber wrote to clients, noting that investors are increasing bets that the Mexico central bank will take its time with rate hikes. (Additional reporting by Walter Brandimarte in New York, Jason Lange in Mexico City and Cyntia Barrera in Acapulco; editing by Carol Bishopric)